The Ministry of Finance has adjusted its borrowing tactics on the debt market

The Ministry of Finance adjusted its borrowing tactics on the debt market: in addition to long-term OFZs, it began offering investors relatively short-term securities. The adjustment that occurred was the Ministry of Finance’s response to the banks’ request to increase the liquidity of shorter-term issues, due to the compression of which the pricing of such securities became less market-based.

At the latest auctions, the Ministry of Finance accommodated the main investors – banks – and began offering not only long-term OFZs (more than seven years), but also shorter ones – three years. The last time the ministry placed bonds with such maturity was only in the first half of 2020. “Over the past ten years, the Ministry of Finance has consistently adhered to the strategy of initial placements of OFZ, which provides for the preference of long issues with fixed coupons and the avoidance of concentrations of redemptions on certain segments of the yield curve,” note Renaissance Capital analysts.

At the same time, the Ministry of Finance offers short-term issues in doses, within 10 billion rubles.

Total demand for short issue on Tuesday, February 7, exceeded 15 billion rubles, but the Ministry of Finance satisfied a little more than half of the applications (8.05 billion rubles). At the same time, at the unlimited auction for the placement of OFZ maturing in March 2034, the placement volume amounted to 70.7 billion rubles. with demand amounting to 91.6 billion rubles. The weighted average yield on short-term issues amounted to 11.94% per annum, on long-term issues – 12.23% per annum.

Last week the Ministry of Finance registered immediately three additional issues of classic OFZs with maturity in 2026–2027 for 100 billion rubles each. every. The press service of the department noted that the issues of these additional issues are not considered by the Ministry of Finance as a significant source of attracting borrowed resources to the federal budget. “These additional issues will be offered in limited volumes in order to increase the liquidity of short-term issues of government securities, in connection with numerous requests from participants in the Russian debt market, as well as to ensure diversification of the proposed OFZs by maturity,” they noted. “Several banks asked the Ministry of Finance about additional placements of small volumes of 2-5-year OFZs at a meeting with market participants in December last year,” a market source said.

New placements of short issues are designed to improve the situation with secondary liquidity in such securities.

“In the absence of new supply in the short segment of the yield curve, previously placed securities gradually settle in investors’ portfolios (plus a certain part, apparently, is blocked by non-residents), and trading activity decreases. This leads to distortion of pricing in this segment,” notes Andrey Kulakov, head of the fixed income instruments analysis department at Gazprombank.

The current situation in the debt market is most critical for its key participants – banks. Such a request from large banks, according to Sovcombank chief analyst Mikhail Vasiliev, may be associated with a gradual tightening of the short-term liquidity standard (SLR) for systemically important banks. The Central Bank’s requirements for the implementation of the Tax Code will be tightened from March 1 (then from July 1, from January 1, 2025, etc.). “To comply with the NCL, large banks will have to increase the volume of highly liquid assets. It is likely that this will be done mainly through the acquisition of federal loan bonds,” the expert believes.

At the same time, market participants do not expect an increase in the volume of placements of such securities. “In the coming years, large OFZ repayments are coming, so the Ministry of Finance is placing the main emphasis in placements on long-term government bonds,” notes Mikhail Vasiliev. At the same time, the placed volume is within 10 billion rubles. enough to improve the liquidity situation. Moreover, the average daily volume of secondary exchange trading for all classes and terms of OFZ varies around this level. “In this context, the volume offered at the auction for the purpose of increasing the liquidity of the secondary market does not look small,” says Mr. Kulakov.

Vitaly Gaidaev